Correlation Between United Utilities and KURITA WTR

Can any of the company-specific risk be diversified away by investing in both United Utilities and KURITA WTR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining United Utilities and KURITA WTR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Utilities Group and KURITA WTR INDUNSPADR, you can compare the effects of market volatilities on United Utilities and KURITA WTR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in United Utilities with a short position of KURITA WTR. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and KURITA WTR.

Diversification Opportunities for United Utilities and KURITA WTR

-0.11

Correlation Coefficient

United Utilities  KURITA WTR

Good diversification

The 3 months correlation between United and KURITA is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and KURITA WTR INDUNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KURITA WTR INDUNSPADR and United Utilities is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on United Utilities Group are associated (or correlated) with KURITA WTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KURITA WTR INDUNSPADR has no effect on the direction of United Utilities i.e., United Utilities and KURITA WTR go up and down completely randomly.

Pair Corralation between United Utilities and KURITA WTR

Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the KURITA WTR. But the stock apears to be less risky and, when comparing its historical volatility, United Utilities Group is 1.19 times less risky than KURITA WTR. The stock trades about -0.35 of its potential returns per unit of risk. The KURITA WTR INDUNSPADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,000  in KURITA WTR INDUNSPADR on October 11, 2024 and sell it today you would lose (50.00) from holding KURITA WTR INDUNSPADR or give up 0.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United Utilities Group  vs.  KURITA WTR INDUNSPADR

United Utilities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, United Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KURITA WTR INDUNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KURITA WTR INDUNSPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with United Utilities and KURITA WTR

The main advantage of trading using opposite United Utilities and KURITA WTR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, KURITA WTR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KURITA WTR will offset losses from the drop in KURITA WTR's long position.

The idea behind United Utilities Group and KURITA WTR INDUNSPADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..